Accounting and Tax Services
Apr 12

A few tax updates

IRS Disallows Wages Paid to Children: The taxpayer, a mother of three young children, maintained a law practice as a sole proprietor. During summer school breaks, the taxpayer brought her children into her office for brief time periods to help with shredding, mailing, photocopying, and answering phones. Although she didn’t issue Form W-2 to her children, keep payroll records, or withhold Federal tax payments, the taxpayer deducted approximately $29,000 in “wages paid to minor children” on her Schedules C for 2006–2008. The IRS issued a notice of deficiency, disallowing all of the deductions for the children’s wages. The taxpayer argued that she had paid the children by contributing to their Section 529 college education plans. The Tax Court limited the deduction to $250 for each child in each of the years at issue because the reasonableness of the amounts paid could not be determined due to the lack of payroll records. John H. and Lisa M. Fisher , TC Summ. Op. 2016-10 (Tax Ct.).

2016 and Revised 2015 Vehicle Depreciation Limits: The IRS released the inflation-adjusted Section 280F depreciation deduction limits for owners of passenger autos, light trucks, and vans first placed in service during 2016; and lease inclusion amounts for lessees of passenger autos, trucks, and vans first leased in 2016. The 2016 depreciation limit for passenger autos is $3,160 for the first year or $11,160 with bonus depreciation. These amounts are the same as the 2015 limits (after the bonus depreciation was retroactively extended) for all tax years. The 2016 limit for trucks and vans is $3,560 for the first tax year or $11,560 with bonus depreciation. These limits are $100 higher than those in 2015, except for the third year amount, which is unchanged from 2015. In addition, the tables of depreciation limits and lessee inclusion amounts for automobiles first placed in service or leased during 2015 are revised to reflect the 50% bonus depreciation, which was retroactively extended by the PATH Act of 2015, for vehicles placed in service in the first year. Rev. Proc. 2016-23, 2016-16 IRB .

About Reed Tinsley, CPA

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